The publication of the proposals starts the clock running on the comment periods. Comments on the proposal to rescind the ATR provisions are due on or before May 15, 2019. Comments on the proposal to delay the compliance date for the ATR provisions are due on or before March 18, 2019.

On February 21, 2019, from 12 p.m. to 1 p.m. ET, Ballard Spahr attorneys will hold a webinar, “CFPB Payday Lending Rule: Status and Prospects.” The webinar registration form is available here.

Comptroller of the Currency Joseph Otting issued a statement today in support of the CFPB’s proposal that would rescind in their entirety the ability-to-repay (ATR) provisions in its final payday/auto title/high-rate installment loan rule. (The CFPB has also proposed to delay the mandatory compliance date for the ATR provisions until November 19, 2020 but took no action to change the rule’s payment provisions or the August 19, 2019 compliance date for the payment provisions.)

In his statement, Comptroller Otting calls the proposal “an important and courageous step that will allow banks and other responsible lenders to again help consumers meet their short-term small-dollar needs.” With regard to bank small-dollar loans, he observes that “[b]anks may not be able to serve all of this large market, but they can reach a significant portion of it and bring additional options and more competition to the marketplace while delivering safe, fair, and affordable products that promote the long-term financial goals of their customers.”

In May 2018, the OCC issued a bulletin encouraging the banks it supervises “to offer responsible short-term, small-dollar installment loans, typically two to 12 months in duration with equal amortizing payments, to help meet the credit needs of consumers.” The bulletin was intended “to remind banks of the core lending principles for prudently managing the risks associated with offering short-term, small-dollar installment lending programs.”

When the OCC withdrew its prior restrictive deposit advance product guidance in October 2017, we commented that the OCC appeared to be inviting banks to consider offering the product. The bulletin appeared to confirm that the OCC intended to invite the financial institutions it supervises to offer similar products to credit-starved consumers. However, it suggested that such products should be even-payment amortizing loans with terms of at least two months. We observed that it might or might not have been a coincidence that the products the OCC described in the bulletin would not have been subject to the ATR requirements of the CFPB’s payday loan rule (or potentially to any of the rule’s requirements).

Assuming the ATR requirements are rescinded as proposed, we hope the OCC will provide additional guidance encouraging the banks it supervises to offer a wider range of small-dollar loan products. We are aware of at least one national bank and one state member bank that currently offer short-term deposit advances to their customers.

A group of 13 state attorneys general and the District of Columbia AG have sent a letter to the FDIC commenting on the agency’s request for information on small-dollar lending. The RFI, published in November 2018, seeks input on “steps the FDIC could take to encourage FDIC-supervised institutions to offer responsible, prudently underwritten small-dollar credit products that are economically viable and address the credit needs of bank customers.”

In their letter, the AGs assert that “payday lenders are once again returning to ‘rent-a-bank’ schemes in order to evade state law.” They recommend that “the FDIC discourage banks from entering into these relationships in any guidance it issues on small-dollar lending.”

The AGs also recommend “that the FDIC discourage banks from extending small-dollar loans without considering the consumer’s ability to repay” and “include in any guidance on small-dollar lending factors banks should consider in evaluating a consumer’s ability to repay.” The specific factors they urge the FDIC to identify are “a consumer’s monthly expenses such as recurring debt obligations and necessary living expenses,” “a consumer’s ability to repay the entire balance of the proposed loan at the end of the term without re-borrowing,” and the “consumer’s ability to absorb an unanticipated financial event…and, nonetheless, still be able to meet the payments as they become due.”

In May 2018, the OCC issued a bulletin intended to encourage its supervised institutions to offer small-dollar loans. With the comment period on the FDIC’s RFI having ended on January 22, the FDIC could soon follow suit.

In October 2018, the CFPB issued a statement in which it stated that it expects to issue a proposed rule this month to revisit the ability-to-repay provisions of its final payday/vehicle title/ high-rate installment loan rule but not the rule’s payments provisions. The Bureau also stated that its proposal would address the rule’s August 19, 2019 compliance date. On January 14, American Bankerpublished an article indicating that the Bureau was expected to issue its proposal “within days or weeks.” According to the article, the Bureau has concluded that the best approach is to entirely remove the rule’s ability-to-repay provisions.

The CFPB is asking the Texas federal district court to give it a 45-day extension to respond to the preliminary injunction motion filed by two trade groups in their lawsuit challenging the CFPB’s final payday/auto title/high-rate installment loan rule (Payday Rule). The motion seeks a preliminary injunction to block the CFPB from enforcing the Payday Rule and asks the court to act on the motion by November 1. The trade groups also filed a motion to lift the stay of their lawsuit that the district court had granted despite denying their request for a stay of the Payday Rule’s August 19, 2019 compliance date.

In its motion to extend the response deadline, the CFPB states that, if the stay of the lawsuit were not in effect, its response would be due by September 21. The 45-day extension is sought if the court grants the trade groups’ motion to lift the stay. In support of its request, the CFPB states the following:

The relief sought by this motion will not prejudice Plaintiffs. Moreover, to the extent that Plaintiffs aver their members are suffering irreparable harm that justifies Plaintiffs’ request for a ruling from this Court by November 1, the current time constraints are largely of Plaintiffs’ own making. Plaintiffs did not file this lawsuit challenging the Payday Rule until almost 6 months after that rule was published in the Federal Register. Plaintiffs then waited 94 days after the Court denied the parties’ joint motion to stay the compliance date of the Payday Rule, including 38 days after the Court denied Plaintiffs’ motion for reconsideration, before submitting their Motion for a Preliminary Injunction. The Bureau and the Court should not be unduly rushed in arguing and adjudicating these issues as a result of Plaintiffs’ own delay. The requested extension would, if granted, give the Bureau 45 days to respond to Plaintiffs’ motion.

Early this year, the CFPB announced that it intended to engage in a rulemaking process to reconsider the Payday Rule pursuant to the Administrative Procedure Act (APA) and in its Spring 2018 rulemaking agenda, it indicated that it expects to issue a Notice of Proposed Rulemaking to revisit the Payday Rule in February 2019. In their Unopposed Motion to Lift the Stay of Litigation, the trade groups state that the CFPB “has noted that it does not expect that rulemaking to be complete before the compliance date. Moreover, it is impossible to know what the result of that rulemaking will be.” They assert that because the compliance date has not been stayed, they “now have no choice but to pursue a preliminary injunction” to avoid the irreparable injuries the trade groups’ members will suffer in preparing for compliance with the Payday Rule’s requirements. They indicate that they have conferred with the CFPB about the motion and that the CFPB has stated that it does not oppose the motion provided the trade groups agree that the CFPB does not have to file an answer in the case pending further court order. The trade groups agreed to the CFPB’s request.

In the preliminary injunction motion, the trade groups argue that they are likely to succeed on the merits in their lawsuit challenging the Payday Rule because:

The Payday Rule was adopted by an unconstitutionally-structured agency.

The lending practices prohibited by the Payday Rule do not meet the CFPA’s standard for an act or practice to be deemed “unfair” because extending payday loans without satisfying the Bureau’s “ability to repay” determination is not likely to cause “substantial injury” to consumers, any injury caused by the prohibited practices is “reasonably avoidable,” and any injury that is not reasonably avoidable is “outweighed by countervailing benefits.”

The lending practices prohibited by the Payday Rule do not meet the CFPA’s standard for an act or practice to be deemed “abusive” because consumers do not lack “understanding” of the loans covered by the Payday Rule and the prohibited practices do not take “unreasonable advantage” of consumers’ inability to protect their interests.

The Payday Rule violates the CFPA provision prohibiting the Bureau from establishing a usury limit.

The account access practices prohibited by the Payday Rule do not meet the CFPA’s standards for an act or practice to be deemed “abusive” or “unfair.”

The trade groups also argue that a preliminary injunction is necessary to prevent irreparable harm to their members in the form of the “massive irreparable financial losses” they will suffer if required to comply with the Payday Rule beginning in August 2019. They assert that these harms are not mitigated by the Bureau’s plans to reconsider the Payday Rule because “[t]he outcome of that rulemaking is uncertain and, in any event, repeal would not remedy the harms that are occurring now.”

Finally, the trade groups contend that the balance of harms and public interest favor a preliminary injunction. With regard to the balance of harms, they assert that there will be no cost to the Bureau in preserving the status quo pending an adjudication of the Payday Rule’s validity and “given its decision to reconsider the Final Rule, the Bureau will actually benefit from an injunction, which will ensure that the Bureau has sufficient time to conduct a thorough and careful reassessment of the rule.” (emphasis included). With regard to the public interest, the trade groups assert that the Payday Rule’s “unlawful nature” weighs heavily in favor of an injunction and a stay “will ensure that borrowers whom the rule would otherwise deprive of needed sources of credit will continue to have access to payday loans until the rule’s legality is resolved.”

The trade groups’ motion to stay the compliance date and litigation was filed jointly with the CFPB. In the preliminary motion, the trade groups state that they conferred with the CFPB and the CFPB stated that it could not take a position on the motion before reading it. Whether or not the CFPB opposes the motion, we expect consumer advocacy groups, in all likelihood the same groups that opposed the stay motion, will seek to file an amicus brief opposing the preliminary motion. Should the CFPB not oppose the preliminary injunction motion, the consumer advocacy groups are likely to assert as they did in opposing the stays that their participation is necessary to provide the court with the benefit of adversarial briefing.

We were hopeful that after the district court denied the trade groups’ request for reconsideration of the court’s denial of a stay of the Payday Rule’s compliance date, the CFPB would move quickly to issue a proposal to delay the compliance date pursuant to the APA’s notice-and-comment procedures. The filing of the preliminary injunction motion suggests that the trade groups are not optimistic that the CFPB will promptly take this course. Perhaps the CFPB will reveal its plans in its response to the motion.

In light of the CFPB’s prior support for the trade groups’s stay motion, the CFPB might consent to the entry of a preliminary injunction. Even if it does so, however, there is no certainty that the district court will grant a preliminary injunction. If the district court were to deny the preliminary injunction motion, the trade groups would have the right to appeal the denial to the Fifth Circuit which already has before it another case which raises the same constitutional challenge to the CFPB that the trade groups have raised.

On October 10, 2018, from 12 p.m. to 1 p.m. ET, Ballard Spahr attorneys will hold a webinar, “Key Takeaways from the CFPB’s Summer 2018 Supervisory Highlights.” The webinar registration form is available here.

Noticeably absent from the new report’s introduction and the Bureau’s press release about the report are statements touting the amount of restitution payments that resulted from supervisory resolutions or the amounts of consumer remediation or civil money penalties resulting from public enforcement actions connected to recent supervisory activities. (The report does, however, include summaries of the terms of two consent orders entered into by the Bureau, including its settlement with Triton Management Group, Inc., a small-dollar lender, regarding the Bureau’s allegations that Triton had violated the Truth in Lending Act and the CFPA’s UDAAP prohibition by underdisclosing the finance charge on auto title pledges entered into with consumers.)

The report confirms that the Bureau’s supervisory activities have continued without significant change under its new leadership. It includes the following information:

Automobile loan servicing. The report indicates that in examinations of auto loan servicing activities, Bureau examiners focus primarily on whether servicers have engaged in unfair, deceptive, or abusive acts or practices prohibited by the CFPA. It discusses instances observed by examiners in which servicers had sent billing statements to consumers who had experienced a total vehicle loss showing that the insurance proceeds had been applied to the loan so that the loan was paid ahead and the next payment was due months or years in the future. The CFPB found the due dates in these statements to be inconsistent with the terms of the consumers’ notes which required the insurance proceeds to be applied to the loans as a one-time payment and any remaining balance to be collected according to the consumers’ regular payment schedules. According to the CFPB, sending such statements was a deceptive practice. The CFPB indicates that in response to the examination findings, servicers are sending billing statements that accurately reflect the account status after applying insurance proceeds.

The Bureau also found instances where servicers, due to incorrect account coding or the failure of their representatives to timely cancel the repossession, had repossessed vehicles after the repossession should have been cancelled because the consumer had entered into an extension agreement or made a payment. This was found to be an unfair practice. The CFPB indicates that in response to the examination findings, servicers are stopping the practice, reviewing the accounts of affected consumers, and removing or remediating all repossession-related fees.

Credit cards. The report indicates that in examinations of the credit card account management operations of supervised entities, Bureau examiners typically assess advertising and marketing, account origination, account servicing, payments and periodic statements, dispute resolution, and the marketing, sale and servicing of add-on products. The Bureau found instances where entities failed to properly re-evaluate credit card accounts for APR reductions in accordance with Regulation Z requirements where the APRs on the accounts had previously been increased. The report indicates that the issuers have undertaken, or developed plans to undertake, remedial and corrective actions in response to the examination findings.

Debt collection. In examinations of larger participants, Bureau examiners found instances where debt collectors, before engaging in further collection activities as to consumers from whom they had received written debt validation disputes, had routinely failed to mail debt verifications to such consumers. The Bureau indicates that in response to the examination findings, the collectors are revising their debt validation procedures and practices to ensure that they obtain appropriate verifications when requested and mail them to consumers before engaging in further collection activities.

Mortgage servicing. The report indicates that in examinations of servicers, Bureau examiners focus on the loss mitigation process and, in particular, on how servicers handle trial modifications where consumers are paying as agreed. In such examinations, the Bureau found unfair acts or practices relating to the conversion of trial modifications to permanent status and the initiation of foreclosures after consumers accepted loss mitigation offers. In reviewing the practices of servicers with policies providing for permanent modifications of loans if consumers made four timely trial modification payments, the Bureau found that for nearly 300 consumers who successfully completed the trial modification, the servicers delayed processing the permanent modification for more than 30 days. During these delays, consumers accrued interest and fees that would not have been accrued if the permanent modification had been processed. The servicers did not remediate all of the affected consumers ,did not have policies or procedures for remediating consumers in such circumstances, and attributed the modification delays to insufficient staffing. The Bureau indicates that in response to the examination findings, the servicers are fully remediating affected consumers and developing and implementing policies and procedures to timely convert trial modifications to permanent modifications where the consumers have met the trial modification conditions.

The Bureau also identified instances in which servicers, due to errors in their systems, had engaged in unfair acts or practices by charging consumers amounts not authorized by modification agreements or mortgage notes. The Bureau indicates that in response to the examination findings, the servicers are remediating affected consumers (presumably by refunding or credit the unauthorized amounts) and correcting loan modification terms in their systems.

With regard to foreclosure practices, Bureau examiners found instances where mortgage servicers had approved borrowers for a loss mitigation option on a non-primary residence and, despite representing to borrowers that they would not initiate foreclosure if the borrower accepted loss mitigation offers in writing or by phone by a specified date, initiated foreclosures even if the borrowers had called or written to accept the loss mitigation offers by that date. The Bureau identified this as a deceptive act or practice. The Bureau also found instances where borrowers who had submitted complete loss mitigation applications less than 37 days from a scheduled foreclosure sale date were sent a notice by their servicer indicating that their application was complete and stating that the servicer would notify the borrowers of their decision on the applications in writing within 30 days. However, after sending these notices, the servicers conducted the scheduled foreclosure sales without making a decision on the borrowers’ loss mitigation application. Interestingly, while the Bureau did not find that this conduct amounted to a “legal violation,” it did find that it could pose a risk of a deceptive practice.

Payday/title lending. Bureau examiners identified instances of payday lenders engaging in deceptive acts or practices by representing in collection letters that “they will, or may have no choice but to, repossess consumers’ vehicles if the consumers fail to make payments or contact the entities.” The CFPB observed that such representations were made “despite the fact that these entities did not have business relationships with any party to repossess vehicles and, as a general matter, did not repossess vehicles.” The Bureau indicates that in response to the examination findings, these entities are ensuring that their collection letters do not contain deceptive content. Bureau examiners also observed instances where lenders had used debit card numbers or Automated Clearing House (ACH) credentials that consumers had not validly authorized them to use to debit funds in connection with a defaulted single-payment or installment loan. According to the Bureau, when lenders’ attempts to initiate electronic fund transfers (EFTs) using debit card numbers or ACH credentials that a borrower had identified on authorization forms executed in connection with the defaulted loan were unsuccessful, the lenders would then seek to collect the entire loan balance via EFTs using debit card numbers or ACH credentials that the borrower had supplied to the lenders for other purposes, such as when obtaining other loans or making one-time payments on other loans or the loan at issue. The Bureau found this to be an unfair act or practice. With regard to loans for which the consumer had entered into preauthorized EFTs to recur at substantially regular intervals, the Bureau found this conduct to also violate the Regulation E requirement that preauthorized EFTs from a consumer’s account be authorized by a writing signed or similarly authenticated by the consumer. The Bureau indicates that in response to the examination findings, the lenders are ceasing the violations, remediating borrowers impacted by the invalid EFTs, and revising loan agreement templates and ACH authorization forms.

Small business lending. The Bureau states that in 2016 and 2017, it “began conducting supervision work to assess ECOA compliance in institutions’ small business lending product lines, focusing in particular on the risks of an ECOA violation in underwriting, pricing, and redlining.” It also states that it “anticipates an ongoing dialogue with supervised institutions and other stakeholders as the Bureau moves forward with supervision work in small business lending.” In the course of conducting ECOA small business lending reviews, Bureau examiners found instances where financial institutions had “effectively managed the risks of an ECOA violation in their small business lending programs,” with the examiners observing that “the board of directors and management maintained active oversight over the institutions’ compliance management system (CMS) framework. Institutions developed and implemented comprehensive risk-focused policies and procedures for small business lending originations and actively addressed the risks of an ECOA violation by conducting periodic reviews of small business lending policies and procedures and by revising those policies and procedures as necessary.” The Bureau adds that “[e]xaminations also observed that one or more institutions maintained a record of policy and procedure updates to ensure that they were kept current.” With regard to self-monitoring, Bureau examiners found that institutions had “implemented small business lending monitoring programs and conducted semi-annual ECOA risk assessments that include assessments of small business lending. In addition, one or more institutions actively monitored pricing-exception practices and volume through a committee.” When the examinations included file reviews of manual underwriting overrides at one or more institutions, Bureau examiners “found that credit decisions made by the institutions were consistent with the requirements of ECOA, and thus the examinations did not find any violations of ECOA.” The only negative findings made by Bureau examiners involved instances where institutions had collected and maintained (in useable form) only limited data on small business lending decisions. The Bureau states that “[l]imited availability of data could impede an institution’s ability to monitor and test for the risks of ECOA violations through statistical analyses.”

Supervision program developments. The report discusses the March 2018 mortgage servicing final rule and the May 2018 amendments to the TILA-RESPA integrated disclosure rule. With regard to fair lending developments, it discusses recent HMDA-related developments and small business lending review procedures. With regard to small business lending, the Bureau highlights that its reviews include a fair lending assessment of an institution’s compliance management system (CMS) related to small business lending and that CMS reviews include assessments of the institution’s board and management oversight, compliance program (policies and procedures, training, monitoring and/or audit, and complaint response), and service provider oversight. The CFPB indicates that in some ECOA small business lending reviews, examiners may look at an institution’s fair lending risks and controls related to origination or pricing of small business lending products, including a geographic distribution analysis of small business loan applications, originations, loan officers, or marketing and outreach, in order to assess potential redlining risk. It further indicates that such reviews may include statistical analysis of lending data in order to identify fair lending risks and appropriate areas of focus during the examination. The Bureau states that “[n]otably, statistical analysis is only one factor taken into account by examination teams that review small business lending for ECOA compliance. Reviews typically include other methodologies to assess compliance, including policy and procedure reviews, interviews with management and staff, and reviews of individual loan files.”

In the CFPB’s RFI on its supervision program, one of the topics on which the CFPB sought comment is the usefulness of Supervisory Highlights to share findings and promote transparency. The new report indicates that the Bureau “expects the publication of Supervisory Highlights will continue to aid Bureau-supervised entities in their efforts to comply with Federal consumer financial law.” Presumably, this means that we will now again be seeing new editions of Supervisory Highlights on a regular basis.

On August 7, the Texas federal court hearing the lawsuit filed by two trade groups challenging the CFPB’s final payday/auto title/high-rate installment loan rule (Payday Rule) denied the trade groups’ motion for reconsideration. The motion asked the court to reconsider its June 12 order granting a stay of the lawsuit but denying a stay of the Payday Rule’s August 19, 2019 compliance date.

Last Friday, the trade groups and the CFPB filed a Joint Status Report with the court. The report restates the CFPB’s intention to engage in a rulemaking to reconsider the Payday Rule and indicates that the Bureau “is engaged in ongoing work to prepare a notice of rulemaking to reconsider the Payday Rule and expects to issue that notice of proposed rulemaking by early 2019.” The trade groups also “represent that Plaintiffs’ members continue to face substantial costs in preparing for compliance with the Payday Rule.”

It is disappointing that the Joint Status Report does not reveal whether the CFPB plans to issue a proposal to delay the Payday Rule’s compliance date pursuant to the Administrative Procedure Act’s notice-and-comment procedures. In light of the court’s denial of the reconsideration motion, we had expressed our hope that the CFPB would move quickly to issue such a proposal to give the Bureau additional time to revisit the Payday Rule and engage in substantive rulemaking. We remain hopeful that the CFPB will soon issue a proposal to delay the compliance date.

A Texas federal court has denied the motion for reconsideration filed by the trade groups challenging the CFPB’s final payday/auto title/high-rate installment loan rule (Payday Rule). The motion asked the court to reconsider its June 12 order granting the stay of the trade groups’ lawsuit challenging the Payday Rule that the trade groups had sought in a motion filed jointly with the CFPB but denying the stay of the Payday Rule’s August 19, 2019 compliance date that was also requested in the joint motion.

In light of the court’s denial of the reconsideration motion, we hope that the CFPB will move quickly to issue a proposal to delay the compliance date pursuant to the Administrative Procedure Act’s notice-and-comment procedures. The CFPB has already set forth the rationale for a delay of the compliance date in its response in support of the motion for reconsideration. As a result, it should be able to issue a proposal providing for a delay expeditiously to give the Bureau additional time to revisit the Payday Rule and engage in substantive rulemaking, currently anticipated for February 2019 (according to the CFPB’s latest rulemaking agenda).

The joint motion sought the stay of the compliance date pursuant to Section 10(d) of the Administrative Procedure Act, 5 U.S.C. Section 705. In their initial amicus brief, the advocacy groups argued that a stay of the compliance date while also staying the litigation was inconsistent with the purpose of Section 705 to stay agency action in order to maintain the status quo during judicial review. In its response in support of the motion for reconsideration, the CFPB has argued that the court can properly use its authority under Section 705 to stay the Payday Rule’s compliance date while also staying the litigation because Section 705 contains no “‘active litigation’ requirement.”

In addition to renewing their argument that the trade groups have not satisfied the four factors used to assess requests for Section 705 stays, the advocacy groups devoted most of their proposed new amicus brief to their argument that a stay of the compliance date under Section 705 is not appropriate where the litigation is stayed. Section 705 allows a court reviewing an agency’s action to postpone the effective date of such action “to the extent necessary to prevent irreparable injury… pending conclusion of the review proceedings.”

While taking no position on the motion filed by the advocacy groups to for leave to file another amicus brief, the CFPB again rejects the advocacy groups’ position that Section 705 cannot be invoked to stay the Payday Rule’s compliance date if the trade groups’ lawsuit has been stayed. It argues that nothing in Section 705 “suggests that [the] provision can only be invoked in circumstances where litigation is certain to result in a final judgment on the merits, rather than being resolved by settlement or other means.”

The CFPB also rejects the advocacy groups’ position that the trade groups have not satisfied the four factors used to assess requests for Section 705 stays. The advocacy groups had asserted that the trade groups were highly unlikely to succeed on the merits of their claims about the evidence on which the Payday Rule’s finding of unfairness and abusiveness is based because, in issuing the Payday Rule, the CFPB considered and rejected those arguments. The CFPB states that the fact that it was previously aware of such concerns about the evidence underpinning the Payday Rule “is hardly dispositive of the merits of Plaintiffs’ claims, let alone whether they made the preliminary showing of a substantial case on the merits.”

The joint motion sought the stay of the compliance date pursuant to Section 10(d) of the Administrative Procedure Act (APA), 5 U.S.C. Section 705. In their initial amicus brief, the advocacy groups argued that a stay of the compliance date while also staying the litigation was inconsistent with the purpose of Section 705 to stay agency action in order to maintain the status quo during judicial review. In its response in support of the motion for reconsideration, the CFPB has argued that the court can properly use its authority under Section 705 to stay the Payday Rule’s compliance date while also staying the litigation because Section 705 contains no “‘active litigation’ requirement.”

While renewing their argument that the trade groups have not satisfied the four factors used to assess requests for Section 705 stays, the advocacy groups devote most of their proposed new amicus brief to their argument that a stay of the compliance date under Section 705 is not appropriate where the litigation is stayed. Section 705 allows a court reviewing an agency’s action to postpone the effective date of such action “to the extent necessary to prevent irreparable injury… pending conclusion of the review proceedings.”

The advocacy groups, citing a 1974 U.S. Supreme Court decision, argue that Section 705 was primarily intended to reflect a doctrine that recognized a court’s limited authority to stay an agency action from which an appeal was taken, pending the determination of that appeal. According to the advocacy groups, granting a stay of the compliance date, “would turn [that] doctrine on its head” because by claiming they need both a stay of the litigation while the CFPB reviews the Payday Rule and a section 705 stay of the compliance date, “plaintiffs make clear that they seek a stay pending agency reconsideration, not this Court’s consideration.” (emphasis in original) The advocacy groups reject the CFPB’s argument that the requirement in Section 705 that the stay must be necessary to prevent harm “pending conclusion of the review proceedings” can be satisfied “by a lawsuit stayed at the parties’ request.”

In response to the CFPB’s invocation of “uncertainties and delays inherent in the notice-and-comment rulemaking procedures,” the advocacy groups argue that Section 705 “provides no authority for an end-run around APA requirements that an agency finds inconvenient.”

Practice Leaders

ABOUT THE CFS GROUP

The Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance, including pioneering work in pre-dispute arbitration programs.
Read More